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I currently own a crossover SUV, valued at roughly $9000. I'm planning on leasing a truck in the nearish future, with the intent to finance the balance after the lease ends.

I've read that down payments in general on leases are just masking the cost of the lease. Should I sell the crossover myself, and save the $9000 to put down during the financing after the lease? Does it make a difference? If I traded in my paid-off car during lease negotiations, am I throwing money away?

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    Are you saying you plan to lease a truck, and then purchase the same truck after the lease is over? Usually (but not always), it is better (from a total cost perspective) to buy a vehicle at the beginning, rather than lease and later buy the same vehicle. – TTT Jul 13 '16 at 18:22
  • Forget the idea of buying a truck. Get rid of your current incredibly expensive vehicle at any cost. Buy any used car for $500 to $750 dollars. that used car will run, precisely, exactly, perfectly, the same as your current absurdly expensive vehicle. Maintenance, and the purely random chance of repair costs, will be identical. Cars are a staggering, mind-aching waste of money, with utterly zero benefit (over a simple used $750 car). – Fattie Jul 14 '16 at 13:45
  • My current incredibly expensive vehicle that I owe $0 on? I think you misunderstood. – MrDuk Jul 14 '16 at 13:48
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    @MrDuk: I guess Mr Blow refers to running costs (fuel, insurance, taxes, servicing, repairs, etc) and depreciation. You could switch to a vehicle that has lower costs (and perhaps much lower) for those than a typical crossover SUV. – RedGrittyBrick Jul 14 '16 at 15:15
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    @MrDuk. Agreed. However there is a grain of truth there which I think is worth taking into consideration if, as seems, you desire to optimize your ongoing costs in this area: 1) Truck < Truck+SUV? 2) Some truck < your SUV? 3) Other type of vehicle of equal utility to you < your SUV? You might do the sums and discover none of these are true but I'd say it is worth doing those sums. – RedGrittyBrick Jul 14 '16 at 15:26
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You need to look at the numbers when you're ready to transact. What your crossover is worth now, what the truck will lease for then, what financing deals may or may not be available will all change.

I'm not sure why you've already decided you will lease the truck, perhaps you're planning to take advantage of some kind of business write off. I would personally never put anything down on a lease, though I have argued with people on here about that particular decision. The reality is you need to look at the numbers. Some banks will adjust the interest you pay on your lease to account for your down payment, some don't.

Consider a $9,000 lease, $250 per month for 36 months. Consider you pay $1,000 up front as a down payment.

Example 1: $1,000 lowers the amount due on the lease to $8,000 lowering your monthly payment to $222.22 from $250, the downpayment has accomplished nothing. Over the 36 months you will have still paid the same $9,000.

Example 2: $1,000 up front changes the amount owed and other fees generally applicable to a lease (gap insurance etc) and your payment drops to $215, your total over the lease is now $8,740 ($1,000 down and $7,740 in payments).

You need to look at the numbers. In general if you know you will be purchasing the truck at the end of the lease it's more financially advantageous to just purchase it from the start.

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Trade-in values are generally below what you can get in a private sale. To directly answer your question, you should sell the crossover yourself and use the balance to purchase your new vehicle.

I would encourage you to use the $9k to finance directly without a lease, especially if you are planning on financing after the lease term. The lease will not save you money over the time you drive the vehicle in this case, and worse, will likely expose you to risk of having to pay additional fees if you break certain terms in the lease (mileage, wear and tear, etc)

Best option mathematically is to use the $9k to purchase a vehicle for cash. This provides the lowest total cost of ownership.

Even if you are afraid of purchasing a lemon, leasing a vehicle is awfully expensive insurance against that possibility. You would have to rack up some significant repairs to justify the cost of the lease vs cash over the term of operating the vehicle.

  • OP would be incredibly lucky to get $5000 for their current vehicle. OP should sell it immediately, put $4000 in the bank, and buy a nice used vehicle for $750. There is utterly no difference, at all, in comfort, reliability, speed, maintenance costs and fuel costs between a $700 car and a "$9000" car. – Fattie Jul 14 '16 at 13:47
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    @JoeBlow I hope you can see that the statement "ullterly no difference" is purely your opinion, which you are certainly allowed to have. For the OP, this does not seem to be the case. Economically, the pure transportation value of a car may be considered a commodity (fungible), but if it was the only factor, then the market would reflect that. However, people do buy $10k and $100k cars. Whether or not it is a wise purchase depends on the financial position and values of the buyer. – jkuz Jul 14 '16 at 14:15
  • hi @jkuz - sure, there is a Velben difference. There is genuinely utterly no practical/physical difference (speed, size, comfort, reliability, maintenance costs, etc). The only difference is "prestige". Indeed, just above I typed "There is utterly no difference, at all, in comfort, reliability, speed, maintenance costs and fuel costs" between present vehicle and a $500 vehicle, which is quite true. – Fattie Jul 14 '16 at 14:20
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    Sorry, @JoeBlow I certainly disagree. Quantitative properties like reliability and maintenance are reflected in the market value of an item. Sure, there are qualitative, subjective aspects to market prices. It is fine that you do not value the difference between the items, but it does not follow there there is no difference. – jkuz Jul 14 '16 at 14:36
  • Hmm, I see no difference in maintenance costs (which encompasses reliability, let's say) between a $500 used car and $20000 used car; indeed almost certainly the latter is far, far higher. But let's disagree, cheers!!! – Fattie Jul 14 '16 at 14:37

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